What to know today

  • It’s getting better most of the time.
  • Gold: Can’t stop, won’t stop.
  • $PYPL at these levels?
markets

What Do We Expect?

This is our economy, after all.

We’re all experiencing prices much higher than those we’d grown accustomed to in the pre-pandemic period.

And most people simply can’t relate to central-bank-speak explanations for literal gut-level changes in their day-to-day lives. “Transitory,” lol…

We’re about to be told that prices are still rising, not just compared to a year ago but versus just last month, although perhaps at a slowing pace.

It’s a frustration that goes far beyond the simple goofiness of those “when good news is bad news” price-action days. People hate inflation, to what appears to be an irrational degree.

Still, we are starting to see some normalization after a world-historical destabilizing event, whether or not we can appreciate it together.

And it does make for an intriguing contrast that people are speaking positively about their personal situations while perceiving the world beyond them in starkly negative terms.

Hard to say what’s driving that conflict; safe to say it’s beyond our brief. So let’s check some data.

As Sonu Varghese of Carson Group explained on X on Tuesday, consumers certainly wouldn't be saying they expect their spending to grow 5 percent over the next year if they didn't feel good about their finances.

Households report that they expect to increase their spending by 5.02 percent over the next 12 months.

Meanwhile, both one- and three-year inflation expectations are below 3 percent, which, as we discussed yesterday, is in the pre-pandemic neighborhood.

Consumers’ one- and three-year inflation expectations are both below 3 percent at levels comparable to the pre-pandemic era.

The major equity indexes were mixed to positive on Tuesday, the Nasdaq Composite and the Russell 2000 rising 0.32 percent and 0.34 percent, respectively, while the S&P 500 only just held onto its green number and the Dow Jones Industrial Average gave up 0.02 percent.

Theoretically, we should have some release from that sluggishness today.

Of course, after investors, traders, and speculators see Consumer Price Index data for March at 8:30 a.m. ET, attention will turn to the release of the minutes for the most recent meeting of the Federal Open Market Committee at 2:00 p.m.

And, after that, we’ll look forward to March Producer Price Index data on Thursday and earnings reporting season kicking into serious gear with JPMorgan Chase $JPM, Citigroup $C, and Wells Fargo $WFC sharing numbers on Friday.

In reality, we are always and forever playing an expectations game.

deep dive

Gold Keeps Going Higher

The price of bullion is paying right now.

Whether it reflects anticipation of rate cuts and more inflation, a flight to safety ahead of impending economic catastrophe, geopolitics and the threat of spreading war, or simply just a lot of FOMO, gold is making new all-time highs again.

Mish Schneider has been talking about the importance of the gold price since the debut of her Weekly Market Outlook series on April 4.

And gold is clearly enjoying a healthy bounce here in 2024, with the underlying action continuing to fascinate close observers of the precious metals market.

The barbaric relic seems to be forever, something that has been and always will be.

And there’s a compelling dynamic at play right now that provides a lot of information about the global financial system. So, no, you don’t have to be a gold bug to profit from the yellow metal’s price signals.

But consider this: Gold-backed ETFs have been reporting steady outflows in recent months, even as the price of bullion is making another leg higher.

Central banks as well as institutions and individuals are stockpiling the physical metal.

Gold has reached new all-time highs, driven by demand for physical bullion from global central banks.

Much of the demand for physical gold is coming from Asia, which is driving early intraday surges that ebb when New York trading opens.

The main buyer is the People’s Bank of China, which has been aggressively adding to its stores of bullion since November 2022.  

Open interest in gold futures contracts declined on Monday to a level well below where they were about a month ago. But the price is rising despite Westerners selling 51 tons so far this year.

As Fred Hickey of The High-Tech Strategist noted, the number of open gold futures contracts is 4.6 percent higher than when gold was trading at $1,270 in May 2019 and 3.8 percent higher than when it was at $1,680 in March 2021.

More upward pressure on the gold price could come from investors, traders, and speculators joining in to ride already healthy momentum.

deep dive |
April 10, 2024

Gold Keeps Going Higher

FINANCIAL SERVICES

$PYPL Is a Value Story

It’s priced like a utility right now.

Since Ben Levisohn said in Barron’s on March 14 that it was time to buy PayPal $PYPL the stock has rallied more than 7 percent.

PYPL was up another 0.99 percent on Tuesday after a report From the Research Desk of RBC Capital Markets. RBC added PYPL to its top 30 global ideas list.

The context here is that PYPL is still down nearly 80 percent from an all-time closing high of $308.53 on July 23, 2021.

That was when its position as the payment services provider of the online shopping perfect storm created by the pandemic pushed expectations beyond reason.

But the stock is cheap now. The question is whether it’s “cheap for a reason” or it “represents good value.”

PayPal $PYPL is down more than 80 percent from the all-time high it reached amid the surge of online shopping during the COVID-19 pandemic.

First steps under new management led by CEO Alex Chriss will be to stop and reverse pressure on margins. That means cutting costs and eliminating inefficient operations.

This is still a company with solid tech and a commendable history of innovation, what was once a “new new thing” trading at oldest-school multiples.

RBC rates PYPL a buy with a 12-month target of $74, upside of about 11 percent from Tuesday’s closing price. RBC’s Daniel Perlin is among 20 analysts with “buy” ratings on PYPL. There are 26 “hold” and zero “sell” ratings

Perlin noted that PYPL is well positioned within the ecommerce payments space but must continue to evolve both its technology and its customer base, the latter in terms of size as well as geography.

We’ll have a chance to hear about progress on those fronts when management reports financial and operating results on April 30.

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